Labour Market Statistics, April 2024

 | Institute for Employment Studies  | Apr 2024

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Today’s figures are very poor all round. Employment is down by nearly a full percentage point over the last year, unemployment has risen unexpectedly, while ‘economic inactivity’ (the measure of those people not looking for work and/ or not available to work) has reached its highest rate since 2015 – worse even than it was in the depths of the pandemic. The big caveat on all of this is that the Labour Force Survey continues to be very volatile due to its falling response rates, but even looking through the short-term rises and falls there is no escaping the fact that employment is flat or falling while economic inactivity is rising strongly. And in our view, today’s data presents the clearest signs yet that a weak labour market is holding back growth far more than weak growth is holding back the labour market.

In all, there are now 850 thousand more people out of work than before the pandemic began (aged 16-64) with this growth in worklessness being driven in particular by fewer young people in the labour force, more older people out of work, and more people off work due to long-term health conditions (across all ages). In each of these three areas there are increasingly worrying signs in today’s data: with the number of young people not in full-time education nor the labour force reaching its highest level since comparable records began in 1992 (760 thousand, or 10.7% of all young people); the employment rate for people aged 50-64 now 1.2 percentage points below where it was on the eve of the pandemic, having risen strongly over the previous decade; and worklessness due to ill health setting a new record high today at 2.83 million.

These increases in worklessness are all the more concerning as they have reversed a trend of rising participation in the labour force which had continued through thick and thin over the 25 years before the pandemic. Over that period, between 1995 and 2020, the labour force grew by on average one million people every four years. Over the last four years by contrast, the labour force has not grown at all.

If these issues were being driven by the economy, we would expect to be seeing unemployment rise, redundancies up, vacancies falling and earnings growth weak. In fact, the recent rise in unemployment in today’s data has been almost entirely driven by long-term rather than short-term unemployment (i.e. those more disadvantaged in the labour market); redundancies are close to pre-pandemic levels; vacancies are falling but appear to be levelling off with around 900 thousand unfilled jobs; and earnings growth still sits at around 6% year-on-year.

Indeed today’s earnings figures provides the only bright spot in the data – with ‘real’ pay now growing by around 2% a year and likely to continue as inflation falls. This means that earnings are now £10 a week higher (or 2.5%) in real terms than they were on the eve of the pandemic, which is no small achievement given inflation over the period has totalled 20%.

These figures show once again, and more clearly than ever, why we need to be far better at raising participation in the labour force in order to support growth, raise living standards and tackle inequalities. To their credit, the government announced significant new investment to support this at the 2023 Spring Budget and Autumn Statement, on a range of measures extending employment support, childcare and health services. However in the short term we need to move far more quickly in rolling this out, and in the longer term to look at our wider approach to employment support and services, which is increasingly not fit for purpose (as we are exploring in our Commission on the Future of Employment Support, in partnership with the abrdn Financial Fairness Trust). Employers will need to step up too, both in terms of what happens in workplaces (the design of jobs and the support that they offer) and in how they work with wider local partners who are engaging and supporting people outside the labour force.